UK asset manager Schroders has told investors in one of its European property funds that it is unlikely to achieve the promised 8% to 10% average annual return over the 12-year life of the fund, which was launched in October 2007.

Schroders

Rob Bingen, head of European property multi-manager at Schroders, said in an emailed response to Financial News that Continental European Fund II has outperformed the IPD Pan European Property Fund Index since launch. But given the fund’s performance so far and the period of its life, achieving the targeted return “will be challenging”.

Bingen said: “As a consequence of the macro events since October 2008, the property sector has shown a negative performance.”

CEF II is a closed-ended fund that targeted €200m to invest primarily in closed-ended real estate funds. Financial News understands it did not reach this target.

Property funds focused on continental Europe posted negative total returns in the second quarter of this year for the first time in more than two years.

Data from Inrev, the European association for investors in non-listed real estate funds, shows that unlisted continental Europe funds lost 0.4% in the second quarter this year, with capital growth contracting from -0.2% in the first quarter to -1.1% in the second.

Consultants said this fund’s difficulties were not an anomaly. Paul Richards, head of European property at consultants Mercer, said: “This happened with a lot of funds launched before the crash. We much prefer when the fund manager is honest and says they are not going to reach the target.”